GREEN DOT CORP 10-Q

ITEM 1. Financial Statements GREEN DOT CORPORATION CONSOLIDATED BALANCE SHEETS March 31, 2023 December 31, 2022 (unaudited) Assets (In thousands, except par value) Current assets: Unrestricted cash and cash equivalents $ 722,003 $ 813,945 Restricted cash 4,006 5,900 Investment securities available-for-sale, at fair value 15,660 — Settlement assets 482,976 493,395 Accounts receivable, net 57,234 74,437 Prepaid expenses and other assets 63,878 78,155 Total current assets 1,345,757 1,465,832 Investment securities available-for-sale, at fair value 2,353,672 2,363,687 Loans to bank customers, net of allowance for loan losses of $ 13,254 and $ 9,078 as of March 31, 2023 and December 31, 2022, respectively 31,705 21,421 Prepaid expenses and other assets 224,198 192,901 Property, equipment, and internal-use software, net 166,038 160,222 Operating lease right-of-use assets 7,685 8,316 Deferred expenses 7,339 14,547 Net deferred tax assets 111,009 117,167 Goodwill and intangible assets 438,854 445,083 Total assets $ 4,686,257 $ 4,789,176 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 112,121 $ 113,891 Deposits 3,344,903 3,450,105 Obligations to customers 200,102 218,239 Settlement obligations 28,545 40,691 Amounts due to card issuing banks for overdrawn accounts 334 328 Other accrued liabilities 89,916 98,580 Operating lease liabilities 3,207 3,167 Deferred revenue 15,298 25,029 Income tax payable 21,219 11,641 Total current liabilities 3,815,645 3,961,671 Other accrued liabilities 5,548 5,777 Operating lease liabilities 4,464 5,247 Line of credit — 35,000 Total liabilities 3,825,657 4,007,695 Commitments and contingencies (Note 17) Stockholders’ equity: Class A common stock, $ 0.001 par value; 100,000 shares authorized as of March 31, 2023 and December 31, 2022; 51,994 and 51,674 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively 52 52 Additional paid-in capital 347,385 340,575 Retained earnings 799,594 763,582 Accumulated other comprehensive loss ( 286,431 ) ( 322,728 ) Total stockholders’ equity 860,600 781,481 Total liabilities and stockholders’ equity $ 4,686,257 $ 4,789,176 See notes to unaudited consolidated financial statements 1 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, 2023 2022 (In thousands, except per share data) Operating revenues: Card revenues and other fees $ 239,866 $ 212,828 Cash processing revenues 101,823 100,028 Interchange revenues 64,015 78,856 Interest income, net 10,676 8,905 Total operating revenues 416,380 400,617 Operating expenses: Sales and marketing expenses 75,212 83,526 Compensation and benefits expenses 68,781 66,264 Processing expenses 145,054 112,092 Other general and administrative expenses 76,338 87,143 Total operating expenses 365,385 349,025 Operating income 50,995 51,592 Interest expense, net 1,644 87 Other expense, net ( 3,024 ) ( 770 ) Income before income taxes 46,327 50,735 Income tax expense 10,315 12,111 Net income $ 36,012 $ 38,624 Basic earnings per common share: $ 0.70 $ 0.70 Diluted earnings per common share $ 0.69 $ 0.70 Basic weighted-average common shares issued and outstanding: 51,813 54,556 Diluted weighted-average common shares issued and outstanding: 52,021 55,230 See notes to unaudited consolidated financial statements 2 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND LOSS (UNAUDITED) Three Months Ended March 31, 2023 2022 (In thousands) Net income $ 36,012 $ 38,624 Other comprehensive income (loss) Unrealized holding gain (loss), net of tax 36,297 ( 112,596 ) Comprehensive income (loss) $ 72,309 $ ( 73,972 ) See notes to unaudited consolidated financial statements 3 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) Three Months Ended March 31, 2023 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount (In thousands) Balance at December 31, 2022 51,674 $ 52 $ 340,575 $ 763,582 $ ( 322,728 ) $ 781,481 Common stock issued under stock plans, net of withholdings and related tax effects 320 — ( 2,372 ) — — ( 2,372 ) Stock-based compensation — — 9,182 — — 9,182 Net income — — — 36,012 — 36,012 Other comprehensive income — — — — 36,297 36,297 Balance at March 31, 2023 51,994 $ 52 $ 347,385 $ 799,594 $ ( 286,431 ) $ 860,600 Three Months Ended March 31, 2022 Class A Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders' Equity Shares Amount (In thousands) Balance at December 31, 2021 54,868 $ 55 $ 401,055 $ 699,370 $ ( 29,807 ) $ 1,070,673 Common stock issued under stock plans, net of withholdings and related tax effects 206 — ( 2,615 ) — — ( 2,615 ) Stock-based compensation — — 14,858 — — 14,858 Repurchases of Class A Common Stock ( 781 ) ( 1 ) ( 24,999 ) — — ( 25,000 ) Net income — — — 38,624 — 38,624 Other comprehensive loss — — — — ( 112,596 ) ( 112,596 ) Balance at March 31, 2022 54,293 $ 54 $ 388,299 $ 737,994 $ ( 142,403 ) $ 983,944 See notes to unaudited consolidated financial statements 4 Table of Contents GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, 2023 2022 (In thousands) Operating activities Net income $ 36,012 $ 38,624 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, equipment and internal-use software 13,701 13,804 Amortization of intangible assets 5,664 6,517 Provision for uncollectible overdrawn accounts from purchase transactions 1,188 4,700 Provision for loan losses 10,252 10,499 Stock-based compensation 9,182 14,858 Losses in equity method investments 4,068 1,708 Amortization of discount on available-for-sale investment securities ( 556 ) ( 290 ) Impairment of long-lived assets — 2,263 Other ( 1,008 ) ( 583 ) Changes in operating assets and liabilities: Accounts receivable, net 16,015 7,101 Prepaid expenses and other assets 9,392 13,306 Deferred expenses 7,208 5,787 Accounts payable and other accrued liabilities ( 10,415 ) ( 4,430 ) Deferred revenue ( 9,945 ) ( 8,934 ) Income tax receivable/payable 9,880 12,023 Other, net ( 106 ) ( 1,311 ) Net cash provided by operating activities 100,532 115,642 Investing activities Purchases of available-for-sale investment securities — ( 288,958 ) Proceeds from maturities of available-for-sale securities 37,070 86,106 Proceeds from sales and calls of available-for-sale securities 55 2,875 Payments for acquisition of property and equipment ( 19,533 ) ( 19,010 ) Net changes in loans ( 15,069 ) ( 14,693 ) Investment in TailFin Labs, LLC ( 35,000 ) ( 35,000 ) Purchases of other investments — ( 31,934 ) Other investing activities ( 243 ) — Net cash used in investing activities ( 32,720 ) ( 300,614 ) Financing activities Borrowings on revolving line of credit 83,000 50,000 Repayments on revolving line of credit ( 118,000 ) ( 50,000 ) Proceeds from exercise of options and ESPP purchases 144 92 Taxes paid related to net share settlement of equity awards ( 2,516 ) ( 2,707 ) Net changes in deposits ( 104,412 ) 318,280 Net changes in settlement assets and obligations to customers ( 19,864 ) ( 104,691 ) Repurchase of Class A common stock — ( 25,000 ) Net cash (used in) provided by financing activities ( 161,648 ) 185,974 Net (decrease) increase in unrestricted cash, cash equivalents and restricted cash ( 93,836 ) 1,002 Unrestricted cash, cash equivalents and restricted cash, beginning of period 819,845 1,325,640 Unrestricted cash, cash equivalents and restricted cash, end of period $ 726,009 $ 1,326,642 Cash paid for interest $ 2,016 $ 180 Cash paid (refund) for income taxes $ 509 $ ( 11 ) Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period: Unrestricted cash and cash equivalents $ 722,003 $ 1,320,743 Restricted cash 4,006 5,899 Total unrestricted cash, cash equivalents and restricted cash, end of period $ 726,009 $ 1,326,642 See notes to unaudited consolidated financial statements 5 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1— Organization Green Dot Corporation (“we,” “our,” or “us” refer to Green Dot Corporation and its consolidated subsidiaries) is a financial technology and registered bank holding company committed to giving all people the power to bank seamlessly, affordably, and with confidence. Our technology platform enables us to build products and features that address the most pressing financial challenges of consumers and businesses, transforming the way they manage and move money, and making financial empowerment more accessible for all. We offer a broad set of financial services to consumers and businesses including debit, checking, credit, prepaid, and payroll cards, as well as robust money processing services, such as tax refunds, cash deposits and disbursements. We were incorporated in Delaware in 1999 and became a bank holding company under the Bank Holding Company Act and a member bank of the Federal Reserve System in December 2011. Note 2— Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP. We consolidated our wholly-owned subsidiaries and eliminated all significant intercompany balances and transactions. We have also prepared the accompanying unaudited consolidated financial statements in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X and, consequently, they do not include all of the annual disclosures required by GAAP. Reference is made to our Annual Report on Form 10-K for the year ended December 31, 2022 for additional disclosures, including a summary of our significant accounting policies. There have been no material changes to our significant accounting policies during the three months ended March 31, 2023. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal and recurring items, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. These financial statements were prepared using information reasonably available as of March 31, 2023 and through the date of this report. The accounting estimates used in the preparation of our consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained, and as our operating environment changes. Actual results may differ from these estimates due to a variety of factors, including those identified under Part II, Item 1A. "Risk Factors" in this report. Note 3— Revenues As discussed in Note 19 — Segment Informatio n, we determine our operating segments based on how our chief operating decision maker manages our operations, makes operating decisions and evaluates operating performance. Within our segments, we believe that the nature, amount, timing and uncertainty of our revenue and cash flows and how they are affected by economic factors can be further illustrated based on the timing in which revenue for each of our products and services is recognized. Our products and services are offered only to customers within the United States. The following table disaggregates our revenues earned from external customers by each of our reportable segments: Three Months Ended March 31, 2023 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 90,807 $ 34,288 $ 97,523 $ 222,618 Transferred over time 45,820 136,548 718 183,086 Operating revenues (1) $ 136,627 $ 170,836 $ 98,241 $ 405,704 6 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 3—Revenues (continued) Three Months Ended March 31, 2022 Consumer Services B2B Services Money Movement Services Total Timing of recognition (In thousands) Transferred point in time $ 94,890 $ 41,223 $ 96,404 $ 232,517 Transferred over time 59,529 98,754 912 159,195 Operating revenues (1) $ 154,419 $ 139,977 $ 97,316 $ 391,712 (1) Excludes net interest income, a component of total operating revenues, as it is outside the scope of ASC 606, Revenues. Also excludes the effects of inter-segment revenues. Revenues recognized at a point in time are comprised of interchange fees, ATM fees, overdraft protection fees, other similar cardholder transaction-based fees, and substantially all of our cash processing revenues. Revenues recognized over time consists of new card fees, monthly maintenance fees, revenue earned from gift cards and substantially all BaaS (as defined herein) partner program management fees. As presented on our consolidated balance sheets, we record deferred revenue for any upfront payments received in advance of our performance obligations being satisfied. These contract liabilities consist principally of unearned new card fees and monthly maintenance fees. We recognized approximately $ 14.4 million and $ 16.5 million for the three months ended March 31, 2023 and 2022, respectively, that were included in deferred revenue at the beginning of the periods and did not recognize any revenue during these periods from performance obligations satisfied in previous periods. Substantially all of the deferred revenue balances at the beginning of the periods are recognized in the first half of each year. Changes in the deferred revenue balance are driven primarily by the amount of new card fees recognized during the period, and the degree to which these reductions to the deferred revenue balance are offset by the deferral of new card fees associated with cards sold during the period. Note 4— Investment Securities Our available-for-sale investment securities were as follows: Amortized cost Gross unrealized gains Gross unrealized losses Fair value (In thousands) March 31, 2023 Corporate bonds $ 10,000 $ — $ ( 657 ) $ 9,343 Agency bond securities 240,315 — ( 43,626 ) 196,689 Agency mortgage-backed securities 2,475,406 6 ( 335,973 ) 2,139,439 Municipal bonds 29,552 — ( 5,691 ) 23,861 Total investment securities $ 2,755,273 $ 6 $ ( 385,947 ) $ 2,369,332 December 31, 2022 Corporate bonds $ 10,000 $ — $ ( 654 ) $ 9,346 Agency bond securities 240,272 — ( 47,166 ) 193,106 Agency mortgage-backed securities 2,511,958 8 ( 373,704 ) 2,138,262 Municipal bonds 29,613 — ( 6,640 ) 22,973 Total investment securities $ 2,791,843 $ 8 $ ( 428,164 ) $ 2,363,687 7 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 4—Investment Securities (continued) As of March 31, 2023 and December 31, 2022, the gross unrealized losses and fair values of available-for-sale investment securities that were in unrealized loss positions were as follows: Less than 12 months 12 months or more Total fair value Total unrealized loss Fair value Unrealized loss Fair value Unrealized loss (In thousands) March 31, 2023 Corporate bonds $ — $ — $ 9,343 $ ( 657 ) $ 9,343 $ ( 657 ) Agency bond securities 9,129 ( 343 ) 187,559 ( 43,283 ) 196,688 ( 43,626 ) Agency mortgage-backed securities 599,305 ( 25,615 ) 1,537,565 ( 310,358 ) 2,136,870 ( 335,973 ) Municipal bonds 4,747 ( 288 ) 19,114 ( 5,403 ) 23,861 ( 5,691 ) Total investment securities $ 613,181 $ ( 26,246 ) $ 1,753,581 $ ( 359,701 ) $ 2,366,762 $ ( 385,947 ) December 31, 2022 Corporate bonds $ — $ — $ 9,346 $ ( 654 ) $ 9,346 $ ( 654 ) Agency bond securities 8,972 ( 457 ) 184,133 ( 46,709 ) 193,105 ( 47,166 ) Agency mortgage-backed securities 892,068 ( 67,569 ) 1,243,588 ( 306,135 ) 2,135,656 ( 373,704 ) Municipal bonds 16,333 ( 3,370 ) 6,641 ( 3,270 ) 22,974 ( 6,640 ) Total investment securities $ 917,373 $ ( 71,396 ) $ 1,443,708 $ ( 356,768 ) $ 2,361,081 $ ( 428,164 ) Our investments generally consist of highly rated securities, substantially all of which are directly or indirectly backed by the U.S. federal government, as our investment policy restricts our investments to highly liquid, low credit risk assets. As such, we have not recorded any significant credit-related impairment losses during the three months ended March 31, 2023 or 2022 on our available-for-sale investment securities. Unrealized losses as of March 31, 2023 and December 31, 2022 are the result of increases in interest rates as our investment portfolio is comprised predominantly of fixed rate securities. Substantially all of the underlying securities within our investment portfolio were in an unrealized loss position as of March 31, 2023 and December 31, 2022 due to the timing of our investment purchases, as a significant portion of our investments were purchased prior to recent increases in interest rates by the Federal Reserve, and general volatility in market conditions. We do not intend to sell our investments, and we have determined that it is more likely than not that we will not be required to sell our investments before recovery of their amortized cost bases, which may be at maturity. As of March 31, 2023, the contractual maturities of our available-for-sale investment securities were as follows: Amortized cost Fair value (In thousands) Due in one year or less $ 15,837 $ 15,660 Due after one year through five years 51,093 46,045 Due after five years through ten years 174,222 142,045 Due after ten years 54,552 41,804 Mortgage and asset-backed securities 2,459,569 2,123,778 Total investment securities $ 2,755,273 $ 2,369,332 The expected payments on mortgage-backed and asset-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations. 8 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 5— Accounts Receivable Accounts receivable, net consisted of the following: March 31, 2023 December 31, 2022 (In thousands) Trade receivables $ 28,541 $ 26,083 Reserve for uncollectible trade receivables ( 380 ) ( 169 ) Net trade receivables 28,161 25,914 Overdrawn cardholder balances from purchase transactions 3,498 3,821 Reserve for uncollectible overdrawn accounts from purchase transactions ( 2,292 ) ( 2,230 ) Net overdrawn cardholder balances from purchase transactions 1,206 1,591 Cardholder fees 2,518 2,480 Receivables due from card issuing banks 3,847 3,211 Fee advances, net 4,533 28,924 Other receivables 16,969 12,317 Accounts receivable, net $ 57,234 $ 74,437 Activity in the reserve for uncollectible overdrawn accounts from purchase transactions consisted of the following: Three Months Ended March 31, 2023 2022 (In thousands) Balance, beginning of period $ 2,230 $ 3,394 Provision for uncollectible overdrawn accounts from purchase transactions 1,188 4,700 Charge-offs ( 1,126 ) ( 3,746 ) Balance, end of period $ 2,292 $ 4,348 9 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 6— Loans to Bank Customers The following table presents total outstanding loans, gross of the related allowance for credit losses, and a summary of the related payment status: 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Total Current or Less Than 30 Days Past Due Total Outstanding (In thousands) March 31, 2023 Residential $ — $ — $ — $ — $ 4,604 $ 4,604 Commercial — — — — 2,540 2,540 Installment — — — — 3,840 3,840 Consumer 1,823 — — 1,823 24,124 25,947 Secured credit card 680 570 2,220 3,470 4,558 8,028 Total loans $ 2,503 $ 570 $ 2,220 $ 5,293 $ 39,666 $ 44,959 Percentage of outstanding 5.6 % 1.3 % 4.9 % 11.8 % 88.2 % 100.0 % December 31, 2022 Residential $ — $ — $ — $ — $ 4,264 $ 4,264 Commercial — — — — 2,542 2,542 Installment — — — — 1,407 1,407 Consumer 2,261 — — 2,261 12,185 14,446 Secured credit card 712 722 2,239 3,673 4,167 7,840 Total loans $ 2,973 $ 722 $ 2,239 $ 5,934 $ 24,565 $ 30,499 Percentage of outstanding 9.8 % 2.4 % 7.3 % 19.5 % 80.5 % 100.0 % We offer an optional overdraft protection program service on certain demand deposit account programs that allows cardholders who opt-in to spend up to a pre-authorized amount in excess of their available card balance. When overdrawn, the purchase related balances due on these deposit accounts are reclassified as consumer loans. Fees due from our cardholders for our overdraft service are included as a component of accounts receivable. Overdrawn balances are unsecured and considered immediately due from the cardholder. A portion of our secured credit card portfolio is classified as loans held for sale. These loans are included in the long-term portion of prepaid and other assets on our consolidated balance sheets. Changes in valuation allowances are recorded as a component of other income and expenses on our consolidated statement of operations. As of March 31, 2023 and December 31, 2022, the fair value of the loans held for sale amounted to approximately $ 4.6 million and $ 5.3 million, respectively. Nonperforming Loans The following table presents the carrying value, gross of the related allowance for credit losses, of our nonperforming loans. See Note 2 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2022 for further information on the criteria for classification as nonperforming. March 31, 2023 December 31, 2022 (In thousands) Residential $ 146 $ 153 Installment 92 96 Secured credit card 2,220 2,239 Total loans $ 2,458 $ 2,488 10 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 6—Loans to Bank Customers (continued) Credit Quality Indicators We closely monitor and assess the credit quality and credit risk of our loan portfolio on an ongoing basis. We continuously review and update loan risk classifications. We evaluate our loans using non-classified or classified as the primary credit quality indicator. Classified loans include those designated as substandard, doubtful, or loss, consistent with regulatory guidelines. Secured credit card loans are considered classified if they are greater than 90 days past due. However, our secured credit card portfolio is collateralized by cash deposits made by each cardholder in an amount equal to the user's available credit limit, which mitigates the risk of any significant credit losses we expect to incur. The table below presents the carrying value, gross of the related allowance for credit losses, of our loans within the primary credit quality indicators related to our loan portfolio: March 31, 2023 December 31, 2022 Non-Classified Classified Non-Classified Classified (In thousands) Residential $ 4,492 $ 112 $ 4,035 $ 229 Commercial 2,540 — 2,542 — Installment 3,748 92 1,306 101 Consumer 25,947 — 14,446 — Secured credit card 5,808 2,220 5,601 2,239 Total loans $ 42,535 $ 2,424 $ 27,930 $ 2,569 Allowance for Credit Losses Activity in the allowance for credit losses on our loan portfolio consisted of the following: Three Months Ended March 31, 2023 2022 (In thousands) Balance, beginning of period $ 9,078 $ 5,555 Provision for loans 10,252 10,499 Loans charged off ( 6,101 ) ( 6,996 ) Recoveries of loans previously charged off 25 — Balance, end of period $ 13,254 $ 9,058 Note 7— Equity Method Investments On January 2, 2020, we effectuated our agreement with Walmart to jointly establish a new fintech accelerator under the name TailFin Labs, LLC (“TailFin Labs”), with a mission to develop innovative products, services and technologies that sit at the intersection of retail shopping and consumer financial services. The entity is majority-owned by Walmart and focuses on developing tech-enabled solutions to integrate omni-channel retail shopping and financial services. We hold a 20 % ownership interest in the entity, in exchange for annual capital contributions of $ 35.0 million per year from January 2020 through January 2024. We account for our investment in TailFin Labs under the equity method of accounting in accordance with ASC 323 , Investments – Equity Method and Joint Ventures . Under the equity method of accounting, the initial investment is recorded at cost and the investment is subsequently adjusted for, among other things, its proportionate share of earnings or losses. However, given the capital structure of the TailFin Labs arrangement, we apply the Hypothetical Liquidation Book Value ("HLBV") method to determine the allocation of profits and losses since our liquidation rights and priorities, as defined by the agreement, differ from our underlying ownership interest. The HLBV method calculates the proceeds that would be attributable to each partner in an investment based on the liquidation provisions of the agreement if the partnership was to be liquidated at book value as of the balance sheet date. Each partner’s allocation of income or loss in the period is equal to the change in the amount of net equity they are legally able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions. 11 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 7—Equity Method Investments (continued) Any future economic benefits derived from products or services developed by TailFin Labs will be negotiated on a case-by-case basis between the parties. As of March 31, 2023 and December 31, 2022, our net investment in TailFin Labs amounted to approximately $ 113.4 million and $ 82.4 million, respectively, and is included in the long-term portion of prepaid expenses and other assets on our consolidated balance sheets. We recorded equity in losses from TailFin Labs of $ 4.1 million and $ 2.1 million for the three months ended March 31, 2023 and 2022, respectively. These amounts are recorded as a component of other income and expense on our consolidated statements of operations. Our equity method investments also include an investment held by our bank, which amounted to $ 4.8 million at March 31, 2023 and December 31, 2022. Equity in earnings from this investment for the three months ended March 31, 2023 a nd 2022 were de minimis. Note 8— Deposits Deposits are categorized as non-interest or interest-bearing deposits as follows: March 31, 2023 December 31, 2022 (In thousands) Non-interest bearing deposit accounts $ 3,325,110 $ 3,427,799 Interest-bearing deposit accounts Checking accounts 1,028 2,461 Savings 7,619 7,899 Secured card deposits 6,398 6,933 Time deposits, denominations greater than or equal to $250 1,873 2,275 Time deposits, denominations less than $250 2,875 2,738 Total interest-bearing deposit accounts 19,793 22,306 Total deposits $ 3,344,903 $ 3,450,105 The scheduled contractual maturities for total time deposits are presented in the table below: March 31, 2023 (In thousands) Due in 2023 $ 1,429 Due in 2024 538 Due in 2025 770 Due in 2026 858 Due in 2027 1,153 Total time deposits $ 4,748 12 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 9— Debt In October 2019, we entered into a secured credit agreement with Wells Fargo Bank, National Association, and other lenders party thereto. The credit agreement provides for a $ 100.0 million five-year revolving line of credit (the "2019 Revolving Facility"), maturing in October 2024. We use the proceeds of any borrowings under the 2019 Revolving Facility for working capital and other general corporate purposes, subject to the terms and conditions set forth in the credit agreement. We classify amounts outstanding as long-term on our consolidated balance sheets; however, we may make voluntary repayments at any time prior to maturity. As of March 31, 2023, we had no borrowings outstanding on the 2019 Revolving Facility and had the full amount available for use. In March 2023, we amended the terms of our agreement to replace LIBOR with the Secured Overnight Financing Rate ("SOFR"). At our election, loans made under the credit agreement bear interest at 1) an adjusted SOFR rate (the “SOFR Rate") or 2) a base rate determined by reference to the highest of (a) the United States federal funds rate plus 0.50 %, (b) the Wells Fargo prime rate, and (c) an adjusted SOFR rate plus 1.0 % (the “Base Rate"), plus in either case, an applicable margin. The applicable margin for borrowings depends on our total leverage ratio and varies from 1.25 % to 2.00 % for SOFR Rate loans and 0.25 % to 1.00 % for Base Rate loans. We also pay a commitment fee, which varies from 0.20 % to 0.35 % per annum on the actual daily unused portions of the 2019 Revolving Facility. Letter of credit fees are payable in respect of outstanding letters of credit at a rate per annum equal to the applicable margin for SOFR Rate loans. The 2019 Revolving Facility contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements. We must also maintain a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio at the end of each fiscal quarter, as set forth in the credit agreement. At March 31, 2023, we were in compliance with all such covenants. If an event of default shall occur and be continuing under the facility, the commitments may be terminated and the principal amounts outstanding under the 2019 Revolving Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable. We incurred total cash interest expense during the three months ended March 31, 2023 of approximately $ 1.6 million. We did not incur any interest expense during the three months ended March 31, 2022. Note 10— Income Taxes Income tax expense for the three months ended March 31, 2023 and 2022 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows: Three Months Ended March 31, 2023 2022 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 0.8 1.3 General business credits ( 3.4 ) ( 1.6 ) Stock-based compensation 3.7 1.2 IRC 162(m) limitation 1.6 2.5 Bank owned life insurance ( 1.6 ) ( 0.7 ) Nondeductible expenses 0.6 0.3 Other ( 0.4 ) ( 0.1 ) Effective tax rate 22.3 % 23.9 % 13 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 10—Income Taxes (continued) The effective tax rate for the three months ended March 31, 2023 and 2022 differs from the statutory federal income tax rate of 21%, primarily due to state income taxes, net of federal tax benefits, general business credits, stock-based compensation, cash value growth in bank owned life insurance policies, and the Internal Revenue Code (the "IRC") 162(m) limitation on the deductibility of executive compensation. The net decrease in the effective tax rate for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 is primarily due to the impact of an increase of $ 0.8 million in general business credits, an increase of $ 0.4 million in tax benefits from bank owned life insurance policies, a decrease of $ 0.5 million subject to the IRC 162(m) limitation on the deductibility of certain executive compensation, and a decrease of $ 0.4 million in state income taxes, net of federal benefits. These decreases were partially offset by the impact of a $ 1.1 million increase in tax expense associated with shortfalls from stock-based compensation. We recognized a discrete tax expense related to tax shortfalls from stock based-compensation of $ 1.7 million for the three months ended March 31, 2023, compared to a $ 0.6 million discrete tax expense for the prior year comparable period. On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law. The IRA contains a number of revisions to the IRC, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022. To date, these tax law revisions have had no immediate effect and we do not expect that they will have a material impact on our results of operations in the future. We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred. For the three months ended March 31, 2023 and 2022, the provision for GILTI tax expense was not material to our financial statements. We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2023 and 2022, we did no t have a valuation allowance on any of our deferred tax assets as we believe it is more-likely-than-not that we will realize the benefits of our deferred tax assets. We are subject to examination by the Internal Revenue Service, or IRS, and various state tax authorities. We remain subject to examination of our federal income tax return for the years ended December 31, 2017 through 2022. We generally remain subject to examination of our various state income tax returns for a period of four to five years from the respective dates that the returns were filed. The IRS initiated an examination of our 2017 U.S. federal tax return during the second quarter ended June 30, 2020, and the examination remains ongoing as of March 31, 2023. We do not expect the outcome of these examinations will have any material impact on our consolidated financial statements. As of March 31, 2023, we have federal net operating loss carryforwards of approximately $ 15.2 million and state net operating loss carryforwards of approximately $ 102.3 million, which will be available to offset future income. If not used, the federal net operating losses will expire between 2029 and 2034. Of our total state net operating loss carryforwards, approximately $ 59.0 million will expire between 2026 and 2042, while the remaining balance of approximately $ 43.3 million does not expire and carries forward indefinitely. The net operating losses are subject to an annual IRC Section 382 limitation, which restricts their utilization against taxable income in future periods. In addition, we have state business tax credits of approximately $ 20.9 million that can be carried forward indefinitely and other state business tax credits of approximately $ 1.1 million that will start to expire on December 31, 2023 and continue to expire through December 31, 2027. As of March 31, 2023 and December 31, 2022, we had a liability of $ 12.3 million and $ 11.2 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits. The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows: 14 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 10—Income Taxes (continued) Three Months Ended March 31, 2023 2022 (In thousands) Beginning balance $ 11,178 $ 10,972 Increases related to positions taken during the current year 1,260 1,410 Decreases related to positions settled with tax authorities ( 90 ) — Ending balance $ 12,348 $ 12,382 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 11,917 $ 12,060 As of March 31, 2023 and 2022, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $ 1.0 million and $ 0.9 million, respectively. Note 11— Stockholders' Equity Stock Repurchase Program In February 2022, our Board of Directors authorized a $ 100 million increase to our stock repurchase program. As of March 31, 2023, we have an authorized $ 4.5 million remaining under our stock repurchase program for additional repurchases. Accelerated Share Repurchases In March 2022, we entered into an accelerated share repurchase arrangement ("ASR") with a financial institution for an up-front payment of $ 25 million. Final settlement of the ASR was completed in April 2022. The final number of shares received upon settlement for the ASR was determined based on the volume-weighted average price of our common stock over the term of the agreement less an agreed upon discount and subject to adjustments pursuant to the terms and conditions of the ASR. Total shares repurchased under the ASR amounted to 914,037 shares at a volume-weighted average price of $ 27.35 . Other Repurchases In March 2022, we also entered into a repurchase plan under Rule 10b5-1 of the Exchange Act for $ 75 million that went into effect at the conclusion of the ASR. The agreement allowed for $ 10 million of monthly share repurchases through December 31, 2022 until the contract amount was reached, unless otherwise terminated. In December 2022, we early terminated the agreement just prior to completing the entire $ 75 million of repurchases. We repurchased 3,150,181 shares at a volume-weighted average price of $ 22.39 under the 10b5-1 plan. Walmart Restricted Shares On January 2, 2020, we issued Walmart, in a private placement, 975,000 restricted shares of our Class A Common Stock. The shares vested in equal monthly increments through December 1, 2022; however, Walmart was entitled to voting rights and to participate in any dividends paid from the issuance date on the unvested balance. As such, the total amount of restricted shares issued were included in our total Class A shares outstanding. All shares issued to Walmart were fully vested as of December 31, 2022. The estimated grant-date fair value of the restricted shares is recorded as a component of stock-based compensation expense over the related period we expect to benefit under the term of our relationship with Walmart. Note 12— Stock-Based Compensation We currently grant restricted stock unit awards to employees, directors and non-employee consultants under our 2010 Equity Incentive Plan and from time to time may also grant stock option awards. Through our 2010 Employee Stock Purchase Plan, employees are also able to purchase shares of our Class A common stock at a discount through payroll deductions. We have reserved shares of our Class A common stock for issuance under these plans. The total stock-based compensation expense recognized was $ 9.2 million and $ 14.9 million for the three months ended March 31, 2023 and 2022, respectively. 15 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 12—Stock-Based Compensation (continued) Restricted Stock Units Restricted stock unit activity for awards subject to only service conditions was as follows for the three months ended March 31, 2023: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2022 1,555 $ 34.08 Restricted stock units granted 1,050 18.14 Restricted stock units vested ( 363 ) 31.42 Restricted stock units canceled ( 58 ) 37.16 Outstanding at March 31, 2023 2,184 $ 26.77 Performance-Based Restricted Stock Units Performance-based restricted stock unit activity for the three months ended March 31, 2023 was as follows: Shares Weighted-Average Grant-Date Fair Value (In thousands, except per share data) Outstanding at December 31, 2022 644 $ 32.40 Performance restricted stock units granted 724 18.13 Performance restricted stock units vested ( 92 ) 34.91 Performance restricted stock units canceled ( 28 ) 27.74 Adjustment for completed performance periods 15 46.82 Outstanding at March 31, 2023 1,263 $ 24.31 We grant performance-based restricted stock units to certain employees that are subject to the attainment of pre-established internal performance conditions, market conditions, or a combination thereof (collectively referred to herein as "performance-based restricted stock units"). The actual number of shares subject to the award is determined at the end of the performance period and may range from 0 % to 200 % of the target shares granted depending upon the terms of the award. Compensation expense related to these awards is recognized using the accelerated attribution method over the vesting period based on the grant date fair value of the award. Stock Options Total stock option activity for the three months ended March 31, 2023 was as follows: Options Weighted-Average Exercise Price (In thousands, except per share data) Outstanding at December 31, 2022 1,171 $ 26.97 Options exercised ( 8 ) 16.34 Outstanding at March 31, 2023 1,163 $ 27.04 Exercisable at March 31, 2023 1,163 $ 27.04 We did not issue any stock option awards from our 2010 Equity Incentive Plan for the periods presented in these consolidated financial statements. 16 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 13— Earnings per Common Share The calculation of basic and diluted earnings per share (EPS) was as follows: Three Months Ended March 31, 2023 2022 (In thousands, except per share data) Basic earnings per Class A common share Numerator: Net income $ 36,012 $ 38,624 Amount attributable to unvested Walmart restricted shares — ( 191 ) Net income allocated to Class A common stockholders $ 36,012 $ 38,433 Denominator: Weighted-average Class A shares issued and outstanding 51,813 54,556 Basic earnings per Class A common share $ 0.70 $ 0.70 Diluted earnings per Class A common share Numerator: Net income allocated to Class A common stockholders $ 36,012 $ 38,433 Re-allocated earnings — 2 Diluted net income allocated to Class A common stockholders $ 36,012 $ 38,435 Denominator: Weighted-average Class A shares issued and outstanding 51,813 54,556 Dilutive potential common shares: Stock options — 214 Service-based restricted stock units 109 198 Performance-based restricted stock units 68 233 Employee stock purchase plan 31 29 Diluted weighted-average Class A shares issued and outstanding 52,021 55,230 Diluted earnings per Class A common share $ 0.69 $ 0.70 The restricted shares issued to Walmart contained non-forfeitable rights to dividends and were considered participating securities for purposes of computing EPS pursuant to the two-class method. The computation above excludes income attributable to the unvested restricted shares from the numerator and excludes the dilutive impact of those underlying shares from the denominator. For the periods presented, we excluded certain restricted stock units and stock options outstanding, which could potentially dilute basic EPS in the future, from the computation of diluted EPS as their effect was anti-dilutive. Additionally, we have excluded any performance-based restricted stock units where the performance contingency has not been met as of the end of the period, or whereby the result of including such awards was anti-dilutive. The following table shows the weighted-average number of anti-dilutive shares excluded from the diluted EPS calculation: Three Months Ended March 31, 2023 2022 (In thousands) Class A common stock Options to purchase Class A common stock 1,163 139 Service-based restricted stock units 1,248 1,204 Performance-based restricted stock units 359 1,002 Unvested Walmart restricted shares — 271 Total 2,770 2,616 17 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 14— Fair Value Measurements Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value. For more information regarding the fair value hierarchy and how we measure fair value, see Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2022. As of March 31, 2023 and December 31, 2022, our assets carried at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 Total Fair Value March 31, 2023 (In thousands) Assets Investment securities: Corporate bonds $ — $ 9,343 $ — $ 9,343 Agency bond securities — 196,689 — 196,689 Agency mortgage-backed securities — 2,139,439 — 2,139,439 Municipal bonds — 23,861 — 23,861 Loans held for sale — — 4,597 4,597 Total assets $ — $ 2,369,332 $ 4,597 $ 2,373,929 December 31, 2022 Assets Investment securities: Corporate bonds $ — $ 9,346 $ — $ 9,346 Agency bond securities — 193,106 — 193,106 Agency mortgage-backed securities — 2,138,262 — 2,138,262 Municipal bonds — 22,973 — 22,973 Loans held for sale — — 5,324 5,324 Total assets $ — $ 2,363,687 $ 5,324 $ 2,369,011 We based the fair value of our fixed income securities held as of March 31, 2023 and December 31, 2022 on quoted prices in active markets for similar assets. We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three months ended March 31, 2023 or 2022. A reconciliation of changes in fair value for Level 3 assets or liabilities are not considered material to these consolidated financial statements and therefore are not presented for any of the periods presented. 18 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 15— Fair Value of Financial Instruments The following describes the valuation technique for determining the fair value of financial instruments, whether or not such instruments are carried at fair value on our consolidated balance sheets. Short-term Financial Instruments Our short-term financial instruments consist principally of unrestricted and restricted cash and cash equivalents, settlement assets and obligations, and obligations to customers . These financial instruments are short-term in nature, and, accordingly, we believe their carrying amounts approximate their fair values. Under the fair value hierarchy, these instruments are classified as Level 1. Investment Securities The fair values of investment securities have been derived using methodologies referenced in Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2022 . Under the fair value hierarchy, our investment securities are classified as Level 2. Loans We determined the fair values of loans by discounting both principal and interest cash flows expected to be collected using a discount rate commensurate with the risk that we believe a market participant would consider in determining fair value. Under the fair value hierarchy, our loans are classified as Level 3. Deposits The fair value of demand and interest checking deposits and savings deposits is the amount payable on demand at the reporting date. We determined the fair value of time deposits by discounting expected future cash flows using market-derived rates based on our market yields on certificates of deposit, by maturity, at the measurement date. Under the fair value hierarchy, our deposits are classified as Level 2. Debt The fair value of our revolving line of credit is based on borrowing rates currently available to a market participant for loans with similar terms or maturity. The carrying amount of our outstanding revolving line of credit approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. The fair value of the revolving line of credit is classified as a Level 2 liability in the fair value hierarchy. Fair Value of Financial Instruments The carrying values and fair values of certain financial instruments that were not carried at fair value, excluding short-term financial instruments for which the carrying value approximates fair value, at March 31, 2023 and December 31, 2022 are presented in the table below. March 31, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Financial Assets Loans to bank customers, net of allowance $ 31,705 $ 30,844 $ 21,421 $ 18,201 Financial Liabilities Deposits $ 3,344,903 $ 3,344,833 $ 3,450,105 $ 3,450,017 19 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 16— Leases Our leases consist of operating lease agreements principally related to our corporate and subsidiary office locations. Currently, we do not enter into any financing lease agreements. Our leases have remaining lease terms of less than 1 year to approximately 10 years, most of which generally include renewal options of varying terms. Our total lease expense amounted to approximately $ 1.0 million and $ 1.1 million for the three months ended March 31, 2023 and 2022, respectively. Our lease expense is generally based on fixed payments stated within the agreements. Any variable payments for non-lease components and other short term lease expenses are not considered material. Additional Information Additional information related to our right of use assets and related lease liabilities is as follows: March 31, 2023 Cash paid for operating lease liabilities (in thousands) $ 983 Weighted average remaining lease term (years) 3.2 Weighted average discount rate 5.0 % Maturities of our operating lease liabilities as of March 31, 2023 is as follows: Operating Leases (In thousands) Remainder of 2023 $ 2,925 2024 3,935 2025 1,288 2026 280 2027 248 Thereafter 1,386 Total 10,062 Less: imputed interest ( 2,391 ) Total lease liabilities $ 7,671 Note 17— Commitments and Contingencies Financial Commitments As discussed in Note 7 — Equity Method Investments , we are committed to making annual capital contributions in TailFin Labs of $ 35.0 million per year from January 2020 through January 2024. Litigation and Claims In the ordinary course of business, we are a party to various legal proceedings, including, from time to time, actions which are asserted to be maintainable as class action suits. We review these actions on an ongoing basis to determine whether it is probable and estimable that a loss has occurred and use that information when making accrual and disclosure decisions. We have provided reserves where necessary for all claims and, based on current knowledge and in part upon the advice of legal counsel, all matters are believed to be adequately covered by insurance, or, if not covered, we do not expect the outcome in any legal proceedings, individually or collectively, to have a material adverse impact on our financial condition or results of operations. On December 18, 2019, an alleged class action entitled Koffsmon v. Green Dot Corp., et al. , No. 19-cv-10701-DDP-E, was filed in the United States District Court for the Central District of California, against us and two of our former officers. The suit asserts purported claims under Sections 10(b) and 20(a) of the Exchange Act for allegedly misleading statements regarding our business strategy. Plaintiff alleges that defendants made statements that were misleading because they allegedly failed to disclose details regarding our customer acquisition strategy and its impact on our financial performance. The suit is purportedly brought on behalf of purchasers of our securities between May 9, 2018 and November 7, 2019, and seeks compensatory damages, fees and costs. 20 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 17—Commitments and Contingencies (continued) On October 6, 2021, the Court appointed the New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund as lead plaintiff, and on April 1, 2022, plaintiff filed its First Amended Complaint. Defendants filed a motion to dismiss the First Amended Complaint on May 31, 2022, and the motion was heard on December 12, 2022. On February 18, 2020, a shareholder derivative suit and securities class action entitled Hellman v. Streit, et al., No. 20-cv-01572-SVW-PVC was filed in United States District Court for the Central District of California, against us and certain of our officers and directors. The suit avers purported breach of fiduciary duty and unjust enrichment claims, as well as claims under Sections 10(b), 14(a) and 20(a) of the Exchange Act, on the basis of the same wrongdoing alleged in the first lawsuit described above. The suit does not define the purported class allegedly damaged. These cases have been related and, pursuant to a stipulated agreement between the parties, the Hellman suit is stayed pending resolution of any motions to dismiss in the Koffsmon case reference above, after which time the parties will meet and confer on a case schedule, including the schedule for defendants to respond to the complaint. We have not yet responded to the complaints in these matters. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of these matters. Given the uncertainty of litigation and the preliminary stage of these claims, we are currently unable to estimate the probability of the outcome of these actions or the range of reasonably possible losses, if any, or the impact on our results of operations, financial condition or cash flows, except as disclosed. Other Legal Matters We monitor the laws of all 50 states to identify state laws or regulations that apply (or may apply) to our products and services. We have obtained money transmitter licenses (or similar such licenses) where applicable, based on advice of counsel or when we have been requested to do so. If we were found to be in violation of any laws and regulations governing banking, money transmitters, electronic fund transfers, or money laundering in the United States or abroad, we could be subject to penalties or could be forced to change our business practices. From time to time, we enter into contracts containing provisions that contingently require us to indemnify various parties against claims from third parties. These contracts primarily relate to: (i) contracts with our card issuing banks, under which we are responsible to them for any unrecovered overdrafts on cardholders’ accounts; (ii) certain real estate leases, under which we may be required to indemnify property owners for environmental and other liabilities, and other claims arising from our use of the premises; (iii) certain agreements with our officers, directors, and employees, under which we may be required to indemnify these persons for liabilities arising out of their relationship with us; and (iv) contracts under which we may be required to indemnify our retail distributors, suppliers, vendors and other parties with whom we have contracts against claims arising from certain of our actions, omissions, violations of law and/or infringement of patents, trademarks, copyrights and/or other intellectual property rights. Generally, a maximum obligation under these contracts is not explicitly stated. Because the obligated amounts associated with these types of agreements are not explicitly stated, the overall maximum amount of the obligation cannot be reasonably estimated. With the exception of overdrafts on cardholders’ accounts, historically, we have not been required to make payments under these and similar contingent obligations, and no liabilities have been recorded for these obligations in our consolidated balance sheets. For additional information regarding overdrafts on cardholders’ accounts, refer to Note 5 — Accounts Receivable. Note 18— Significant Retailer and Partner Concentration A credit concentration may exist if customers are involved in similar industries, economic sectors, and geographic regions. Our retail distributors operate in similar economic sectors, but diverse domestic geographic regions. The loss of a significant retail distributor could have a material adverse effect upon our card sales, profitability, and revenue growth. Revenues derived from our products sold at retail distributors constituting greater than 10% of our total operating revenues were as follows: Three Months Ended March 31, 2023 2022 Walmart 17 % 20 % 21 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 18—Significant Retailer and Partner Concentration (continued) In addition, approximately 32 % and 23 % of our total operating revenues for the three months ended March 31, 2023 and 2022, respectively, were generated from a single BaaS partner, but without a corresponding concentration to gross profit for the periods. Note 19— Segment Information Our Chief Operating Decision Maker (our "CODM" who is our Chief Executive Officer) organizes and manages our businesses primarily on the basis of the channels in which our product and services are offered and uses net revenue and segment profit to assess profitability. Segment profit reflects each segment's net revenue less direct costs, such as sales and marketing expenses, processing expenses, third-party call center support and transaction losses. Our operations are aggregated amongst three reportable segments: 1) Consumer Services, 2) Business to Business ("B2B") Services, and 3) Money Movement Services. Our Consumer Services segment consists of revenues and expenses derived from deposit account programs, such as consumer checking accounts, prepaid cards, secured credit cards, and gift cards that we offer to consumers (i) through distribution arrangements with more than 90,000 retail locations and thousands of neighborhood Financial Service Center locations (the "Retail channel"), and (ii) directly through various marketing channels, such as online search engine optimization, online displays, direct mail campaigns, mobile advertising, and affiliate referral programs (the "Direct channel"). Our B2B Services segment consists of revenues and expenses derived from (i) our partnerships with some of the United States' most prominent consumer and technology companies that make our banking products and services available to their consumers, partners and workforce through integration with our banking platform (the "Banking-as-a-Service", or "BaaS channel"), and (ii) a comprehensive payroll platform that we offer to corporate enterprises (the "Employer channel") to facilitate payments for today’s workforce. Our products and services in this segment include deposit account programs, such as consumer and small business checking accounts and prepaid cards, as well as our Simply Paid Disbursements services utilized by our partners. Our Money Movement Services segment consists of revenues and expenses generated on a per transaction basis from our services that specialize in facilitating the movement of cash on behalf of consumers and businesses, such as money processing services and tax refund processing services. Our money processing services, such as cash deposit and disbursements, are marketed to third-party banks, program managers, and other companies seeking cash deposit and disbursement capabilities for their customers. Those customers, including our own cardholders, can access our cash deposit and disbursement services at any of the locations within our network of retail distributors and neighborhood Financial Service Centers. We market our tax-related financial services through a network of tax preparation franchises, independent tax professionals and online tax preparation providers. Our Corporate and Other segment primarily consists of net interest income, certain other investment income earned by our bank, interest profit sharing arrangements with certain BaaS partners (a reduction of revenue), eliminations of inter-segment revenues and expenses, and unallocated corporate expenses, which include our fixed expenses such as salaries, wages and related benefits for our employees, professional services fees, software licenses, telephone and communication costs, rent, utilities, and insurance. These costs are not considered when our CODM evaluates the performance of our three reportable segments since they are not directly attributable to any reporting segment. Non-cash expenses such as stock-based compensation, depreciation and amortization of long-lived assets, impairment charges, and other non-recurring expenses that are not considered by our CODM when evaluating our overall consolidated financial results are excluded from our unallocated corporate expenses above. We do not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented. 22 Table of Contents GREEN DOT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED) Note 19—Segment Information (continued) The following tables present financial information for each of our reportable segments for the periods then ended: Three Months Ended March 31, 2023 2022 Segment Revenue (In thousands) Consumer Services $ 139,833 $ 158,757 B2B Services 171,292 133,900 Money Movement Services 98,241 97,316 Corporate and Other 2,997 4,705 Total segment revenues 412,363 394,678 BaaS commissions and processing expenses 4,760 6,512 Other income ( 743 ) ( 573 ) Total operating revenues $ 416,380 $ 400,617 Segment revenue adjustments represent commissions and certain processing-related costs associated with our BaaS products and services, which are netted against our B2B Services revenues when evaluating segment performance, as well as certain other investment income earned by our bank, which is included in Corporate and Other. Three Months Ended March 31, 2023 2022 Segment Profit (In thousands) Consumer Services $ 52,752 $ 54,288 B2B Services 22,219 22,264 Money Movement Services 61,026 61,460 Corporate and Other ( 53,454 ) ( 47,686 ) Total segment profit 82,543 90,326 Reconciliation to income before income taxes Depreciation and amortization of property, equipment and internal-use software 13,701 13,804 Stock based compensation and related employer taxes 9,549 15,169 Amortization of acquired intangible assets 5,664 6,517 Impairment charges — 2,263 Legal settlement expenses 100 ( 426 ) Other expense 2,534 1,407 Operating income 50,995 51,592 Interest expense, net 1,644 87 Other expense, net ( 3,024 ) ( 770 ) Income before income taxes $ 46,327 $ 50,735 23 Table of Contents